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Monthly Archives: May 2009

Citizens at the local level continue to creatively and strategically challenge corporate power by their so-called “constitutional rights.” While these challenges may be around issues of water, food, elections, farms, jobs, etc, they are at root focused on self-governance — the authority of people to make decisions affecting their lives, communities and natural world around them.

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Yes magazine, Summer, 2009Maine Towns Fight Back

Three towns in Maine — Shapleigh, Newman, and Wells — have passed ordinances that strip corporations of the rights of “personhood,” a legal concept that allows companies to claim the same rights as individual citizens.

The ordinances are aimed at stopping the extraction of local groundwater, which the Swiss food corporation Nestle bottles and sells under the label Poland Springs. For years, Maine communities have fought the company’s efforts to expand its water bottling operations.

The towns also recognized the rights of ecosystems to exist and flourish and the rights of citizens to self-govern — including the right to protect their groundwater by placing it in a public trust.

An accurate term to describe the causes of and prescriptions to the current economic crisis is “the looting of America.” That is also the title of a new book by Les Leopold, co-founder and director of the Labor Institute and Public Health Institute and among those who formed the labor-environmental Blue-Green Alliance.

Leopold attempts through the book the near impossible: to clearly and simply describe the root causes of the global economic crisis, the bizarre and complex financial instruments created which resulted in astonishing profits by transformed liabilities into assets, and a range of moderate to radical policy changes to reign in the fantasy-finance casino perpetrated by giant financial corporations and others.

The root of the current crisis goes back to the 1970’s when worker productivity and real worker wages began to diverge. Between 1945 and 1973, as productivity increased (more products and services were produced by workers per hour), firms sought more workers to increase their own profits. This drove up the price of labor.

It all changed beginning in 1973 when corporate owners no longer reinvested productivity profits back into firms (the real economy) or with workers to the same degree. Capital owners kept productivity profits for themselves. The percentage of wealth owned by the top 1% began to sour. Capital owners began looking for alternatives sources of profit of their extra wealth with high rates of return and little risk. The era of fancy financial instruments, led by derivatives, was born.

The derivative, credit default swap, collateralized debt obligation, and other fantasy finance “instruments” are defined and explained with excellent analogies in many cases. Derivatives, for examples, are compared to fantasy baseball where hundreds if not thousands of persons compete by betting on the statistics of real players yet none of whom actually own any of the real baseball teams or have any control over any of the real players. Similarly, derivatives derive their value from some real entity – a stock or bond. Hundreds, if not thousands, can own bets on the same single stock or bond. It’s a financial casino.

The flood of hundreds of billions of dollars into the casino economy fueled more and riskier bets and the housing boom. It enriched the financial corporations that were involved in this new business. As wages declined, debt increased and consumer spending eventually slowed. Meanwhile, real businesses were unable to secure credit for innovation as financial institutions looked to fantasy finance as more profitable.

The housing and debt bubbles burst because that what bubbles do.

Leopold devotes the last two chapters to solutions – divided between, as he says, “Proposals Wall Street Won’t Like” and ones they really won’t like.

In the former category are:– Financial Disaster Insurance – premiums from every conceivable financial sector transaction to pay back taxpayers from the current raid on the treasury and for the recession caused by the financial casino and for the next one. He estimates this could amount to $500 billion per year.– Financial Product Safety Commission – creation of an FDA-like product-approval process before any type of financial “instrument” is permitted on the market.

More radical proposals include:– Wage caps – a $500,000 salary cap of any employee at any financial corporation – the salary of the US President.– Passage of the Employee Free Choice Act – to give workers a chance to increase their collective power.– Raising the minimum wage – to guard against deflation and to shift wealth away from the fantasy-finance casino.– Public takeover the largest pieces of the private financial sector – to protect taxpayers, our economy and what’s left of our democracy.

Leopold has provided a valuable tool to demystify Wall Street’s destructive actions and a variety of tools for public actions to assert greater public control over money and finance.

Citizens in Spokane, WA are taking democracy into their own hands…and challenging corporate so-called “rights” in the process. A coalition of organizations in that community are circulating a petition to generate signatures to force a vote that would change the city charter (the city constitution) that would, if passed by voters, affirm citizens’ right to decide on everything “from healthcare to housing to unionization to protecting the Spokane River to a greater extent from the pollution that it’s been subjected to over the past couple of decades.” The citizen initiative seeks to legally root the rights of people of Spokane over those of corporations.

Last week, I made follow-up phone calls to several of Ohio’s federal elected officials — following up on the Open Letter calling on these esteemed public officials to demand that the federal government enforce the Prompt Corrective Action Law.

Calls were made to the offices of US Senators Brown and Voinovich and US Representatives Sutton, Ryan, Kucinich, LaTourette, Boccieri, Kaptur, and Fudge. This law appears to be a hot potato — no one wants to touch it.

The law mandates that severely undercapitalized banks be taken over. Once under public control:– their toxic assets can be wiped out,– their CEOs can be fired,– they can be broken up,– they could even be transformed into worker owned enterprises

Please contact your US Rep. and US Sens. Brown and Voinovich. Tell them to demand that this law be enforced.

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Public News Service-OH

May 11, 2009

Ohio Group: Bank Stress Tests Show Need for Ignored Banking Law

Cleveland, Ohio ˆ It‚s been on the books for 18 years, but some experts say the recent lack of enforcement of the Prompt Corrective Action Law is costing the government and taxpayers billions of dollars. An effort is underway to draw the attention of Ohio Congressional leaders to the law, which mandates that insolvent or severely under-capitalized institutions regulated by FDIC be taken into receivership.

The stress test results recently released by the government showed that despite federal bailouts, many of the country’s largest banks still need more money. Lois Romanoff with the American Friends Service Committee of Northeast Ohio says the situation could have been avoided had policymakers enforced the federal Prompt Corrective Action Law. Instead, she says, the government essentially has let big bankers loose.

“They have a lot of money to pay for whatever they want. They want to be in charge, and they are, and we are suffering mightily from it. It’s very frightening that we are still not on the right track.”

Romanoff, who serves on the group’s Economic Justice Committee, contends that by not taking over insolvent banks, the Bush and Obama administrations violated the law and wasted billions of taxpayer dollars through bailouts. The stress tests found that 10 bank holding companies, including Ohio-based Fifth-Third and Keycorp, will need to raise about $75 billion combined to survive the current recession.

Romanoff says a system already is in place to deal with insolvent banks, and it doesn’t require a bailout.

“Banks fail every day in this country. We know how to handle it and we know how to protect investors. The FDIC comes in and does it quietly and efficiently.”

A number of organizations, including the American Friends Service Committee, are asking lawmakers to put a stop to big bank bailouts so federal budget priorities can be focused on investing in jobs, health care, education, alternative energy and infrastructure.

“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”– United State Senator Dick Durbin

When one of the most powerful members of Congress, a ranking member of the majority party, confesses to not being so powerful, we need to take notice.

What exactly does Durbin mean by banks “owning” Congress and what are its implications?

When it comes to politics, “ownership” can take many forms:

1. Lobbying elected officials. Corporations that received federal TARP bailout funds spent over $77 million lobbying federal elected officials in 2008. Lobbying can take many forms — from direct meetings with legislators and/or their aides to influence legislation, to sponsorship of “fact-finding” junkets to exotic locations for elected officials, to organizing groups/campaigns to influence legislators.

2. Providing campaign contributions (I prefer the more accurate term “investments”) to elected officials. The Center for Responsive Politics (CRP) reports that TARP bailout corporations in 2008 made $37 million in campaign investments in 2008.

3. Having your own people in political decision-making roles. The list under Bush and now Obama of former big bankers now writing the laws and/or supposedly “regulated” bank actions is led by none other than former Goldman Sachs executive Timothy Geithner, who now heads the Treasury Department. So many former Goldman Sachs execs occupied key financial roles in the Bush and now Obama administrations that the company is affectionately referred to by many as “Government Sachs.”

What are the implications of all this?

1. Money. CPR states the combined $114 million in lobbying and campaign contributions/investments in 2008 yielded $295.2 billion from the federal government’s Troubled Asset Relief Program (TARP) to 26 mega corporations. That translated to a 258,449 percent return. Not a bad investment! And there’s more coming. An additional several trillion dollars in loans and other federal guarantees have been made to the banks — many to back up their so-called “assets” that represents in many cases multiples pieces of paper backing up the same real tangible true asset. It’s a financial mirage in which we taxpayers and our descendents will be paying off for generations.

2. Protection from regulation or control. The mega banks have turned to their friends inside the administration to prevent major regulations from being enacted. AIG employees still received their bonuses. Banks were not forced to use TARP money to expand credit. No audits of banks receiving bailout funds has been passed. There have been no laws calling for a return of misused bailout funds. Legislation to protect home owners from foreclosures through the courts was foiled. Enforcement of the Prompt Corrective Action Law (mandating public control of insolvent banks) is nonexistent. The rules governing “stress tests” of banks are (re)written in by banks The list is long.